Commission Plan Comparison

Why the higher commission rate can pay less

The fictional plans above illustrate a common comparison problem. Plan A pays 12% of eligible revenue. Plan B advertises a higher upper tier of 13%, but pays 10% on the first $40,000. At $80,000 of eligible revenue, Plan A produces $9,600 and Plan B produces $9,200. The rep receiving the higher top rate earns $400 less in this scenario because that rate applies to only part of the revenue.

Use this tool to make that calculation visible. Enter the same eligible amount for both plans, select the actual rate structure and keep the written earning terms beside the numeric fields. Comparing a rate on signed contract value with a rate on collected revenue would require a different analysis; equal-looking inputs do not make the bases equivalent.

Follow the marginal bands before comparing the totals

For Plan B, the first $40,000 earns $4,000. The next $40,000 earns $5,200. Adding those amounts produces $9,200. Applying 13% to the entire $80,000 would produce $10,400, but that would be a retroactive calculation rather than this marginal plan. The difference is $1,200, so the tier wording matters much more than a rounding choice.

The crossover occurs at $120,000 in this example

Above the threshold, Plan B pays 13% of revenue minus $1,200. Plan A pays 12%. The extra percentage point catches up with the $1,200 difference at $120,000 of eligible revenue. This is why one production scenario cannot establish which plan always pays more.

The table is an explanation of these two formulas, not an earnings forecast. A rep whose eligible revenue falls below the crossover has a different numeric comparison from one above it. Use scenarios grounded in the work being discussed instead of selecting only the example that makes a preferred plan look better.

Normalize the earning basis before entering a scenario

Suppose a fictional $20,000 job has $12,000 collected during the month. A 10% plan on signed value produces $2,000 at its stated earning event; 10% on the $12,000 collected produces $1,200 for that period. The $800 difference comes from the basis and timing, not the percentage. Do not enter the same $20,000 into both fields and call the result a like-for-like monthly comparison.

Use the forecast worksheet to distinguish expected signatures from collections when preparing scenarios. Then return to this comparison with a genuinely shared basis, or document why the plans need separate calculations. The calculator does not resolve incompatible definitions by itself.

Test the boundary with one dollar on either side

Under the fictional marginal Plan B, $39,999 earns $3,999.90, $40,000 earns $4,000, and $40,001 earns $4,000.13. The higher rate changes the commission on the extra dollar; it does not reprice the first $40,000. This small boundary check is a quick way to catch a spreadsheet that mistakenly applies the new rate to the entire amount.

If you are still drafting the earning rules, use the sales commission plan builder to document the basis and earning event before comparing scenarios here. A numerical comparison needs agreed definitions; it cannot choose which terms the company should adopt.

Keep the earning event and payment date beside the arithmetic

Two plans can calculate the same amount and still pay it at different points. A signed-job trigger, a completion trigger and a collection trigger describe different events. Existing pipeline, adjustments and exclusions also need their written treatment. This calculator handles the stated flat and two-band marginal structures; draws, bonuses and more complex formulas need the appropriate separate calculation.

For a commission rollout discussion, bring the scenario, the tier breakdown and the approved treatment of those terms together. The rep should be able to reproduce the amount and identify the event that earns it. That is a more useful comparison than debating which headline percentage looks higher.